New rules give China more excuses to enforce exit bans on foreigners [raising also concerns among companies doing business in China]

Last month, China’s State Council enacted two new economic regulations that are raising concerns among foreign firms that do business in China.

The new rules are aimed at punishing foreign companies that try to move their business away from China, including divesting from joint ventures and shifting to suppliers outside China. They are seen as a reaction to efforts of some countries to decouple from China and as a countermeasure to the rising risk of sanctions and other economic weapons.

They explicitly link business behaviour with national security issues.

The kinds of penalties mentioned in these new rules include fines, asset freezing and criminal liability.

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[The] two latest regulations add to this growing number of legal instruments, raising the risk of exit bans even higher for those who travel to China on business.

Another key insight from that report is that many people don’t even know they have been put under an exit ban until they are at the airport trying to leave. Exit bans can last anything from days to years. Irish businessperson Richard O’Halloran was prevented from leaving China for nearly three years (2019 to 2022) because of a civil business dispute.

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Article 16 of the State Council Provisions on Industrial and Supply Chain Security (国务院关于产业链供应链安全的规定) and Article 17 of the Regulations on Countering Improper Extraterritorial Jurisdiction by Foreign States (反外国不当域外管辖条例) both explicitly mention exit bans as one of several actions that can be taken (including fines and criminal prosecution).

The language of both regulations is expansive and vague. But it appears that companies, and people who work for them, can get in trouble if they:

• Collect sensitive supply chain data and other information,

• Take any action that harms China’s supply chains (such as moving business out of China),

• Do not cooperate with investigations, which may include handing over a company’s own sensitive data, and

• Follow or help enforce foreign government sanctions or restrictions against China.

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Since Xi Jinping took power in 2012, China has expanded the legal landscape for exit bans and increasingly used them, sometimes outside legal justification, on everyone from activists to foreign journalists and for transnational repression and other coercive practices.

These latest regulations continue this worrying trend.

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For more on exit bans and the data, you may read the Safeguard Defenders’ report form 2023, Trapped: China’s Expanding Use of Exit Bans (pdf).